American Journal of Operations Research

Volume 10, Issue 4 (July 2020)

ISSN Print: 2160-8830   ISSN Online: 2160-8849

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An Agent-Based Approach to the Newsvendor Problem with Price-Dependent Demand

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DOI: 10.4236/ajor.2020.104006    133 Downloads   302 Views  

ABSTRACT

This research presents an agent-based approach to finding near-optimal solutions to the newsvendor problem with price-dependent demand. The classical newsvendor problem is pursued where the decision of order quantity needs to be made in order to maximize expected profit. Here, the additional caveat of price-sensitive demand is included. This means that price (P) and order quantity (Q) are decision variables under the control of the newsvendor, with the intent of maximizing the expected value of the associated profit. The solution approach exploits an agent-based strategy, where an artificial agent traverses a grid-coordinate system of Price and Quantity values, where each unique Price and Quantity combination results in an expected profit. The agent-based approach consistently results in optimal solutions to a problem from the literature.

Cite this paper

McMullen, P. (2020) An Agent-Based Approach to the Newsvendor Problem with Price-Dependent Demand. American Journal of Operations Research, 10, 101-110. doi: 10.4236/ajor.2020.104006.

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